Margaret Thatcher would never have allowed the crony corporatism that exists
among the Big Six, writes Caroline Flint.

The Tories relish challenging what they see as vested interests in the public sector – whether it’s bashing trade unions, briefing against civil servants or picking fights with public servants. So why are they silent when it comes to vested interests and crony corporatism in the private sector? After Sir John Major’s intervention, suggesting that energy companies’ price rises are unjustified and calling for the Government to impose a windfall tax on excess profits, David Cameron’s failure to act is all the more conspicuous.

Mrs Thatcher would never have stood for it. There aren’t that many policies of hers that I support. But when it came to privatising the electricity and gas industries, she at least understood that a free market only works when there are proper rules to ensure fair play and competition. Otherwise, a benign state monopoly is simply replaced with a rapacious private one.

Today’s energy market, in which a handful of dominant companies set prices and trade much of their energy behind closed doors, is a far cry from a genuinely competitive market.

That’s why Ed Miliband and I announced radical reforms to deliver a fairer energy market that works for ordinary people, rebuilds trust and delivers investment for the future. We will not stand by while energy companies abuse their market power to impose inflation-busting price rises on hard-pressed consumers while they sit on record profits. Our plan to fix the market entails three big changes.

First, at the moment, very little electricity is bought and sold on the open market. Some estimates put the figure as low as 6 per cent. Consumers have no way of knowing if their bills are fair, and other companies can’t break into the market. This reduces competition, leaves the market vulnerable to manipulation, and undermines consumer trust. So we will make energy companies buy and sell their power through an open pool or exchange.

Second, when the energy market was first privatised, there was a clear separation put between companies that generate power and those that sell it to the public – on the assumption that you could only achieve a genuinely competitive market if you had supply companies competing with one another to drive down generation costs. Ironically, when John Major was prime minister, that restriction was lifted and vertical integration was given the green light. The result is a market dominated by a handful of big companies that generate much of the power we use and supply over 98 per cent of homes. Ultimately, when the same company can buy energy from itself to sell on to consumers there is little incentive to keep prices down. So we will make these companies ring-fence their power stations from the businesses that supply our homes and businesses to stop them gaming the market.

Third, at the moment weak competition and poor regulation means that companies know that there are no consequences to increasing prices above levels which would be considered reasonable in a truly competitive market. This means that consumers are left without the protection of either a properly functioning market or an effective regulator. So we will create a tough new energy watchdog with new powers to police the market, including the power to force energy companies to cut their prices when wholesale costs fall – which, in a properly, competitive market should happen anyway.

Our market reforms will reintroduce proper competition and create a system with fairness to consumers at its heart. But these measures will take time to create a market people can trust. So we will take immediate action upon entering office to put a stop to this unfairness and help people facing the cost of living crisis by freezing prices until January 2017 when our reforms will start kicking in. This will save money for 27 million households and 2.4 million businesses.

David Cameron’s failure to get tough with the energy companies is not just leaving hard-pressed consumers massively out of pocket, but is now even exasperating Tory party loyalists like John Major. The Conservatives used to claim to be the party of the free market and vigorous competition. Today, however, as John Major’s intervention so clearly shows, they only speak for corporate monopolies and vested interests. Labour will speak for Britain – and our plans will break the stranglehold of the energy companies and deliver a fairer energy market that works for ordinary people.